When poor nations cannot compete with rich nations to attract capital because of their lower overall...

When poor nations cannot compete with rich nations to attract capital because of their
lower overall productivity, it creates:
A) convergence.
B) long-run divergence.
C) externalities.
D) opportunities for cross-border investment

Expert Solution

Option B Long run divergence

Inequality in opportunities is created along the process of divergence because these opportunities are limited to the people who happen to have lived or were born in these wealthy areas. For example, America’s economy could have grown twice as fast if all Americans lived in places of high productivity over the past 50 years. In many less developed nations in the world, we see that inequality in wealth has risen as the country began to become more integrated with the world.

In order to eliminate the divergence caused by globalization, governments can play a bigger role in creating opportunities locally, while also helping people become more mobile. Foreign Direct Investment (FDI) has helped many emerging markets and is always a viable solution. Policies and programs can be implemented to encourage large corporations to increase their FDI into developing areas of the world.

Rahul Sunny answered 2 years ago

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